Data Security Standards

As a regulatory lawyer, I frequently find myself parsing words and phrases crafted by legislators and agencies that, all too often, are frustratingly vague or contradictory when applied to a particular real-world and perhaps unanticipated (at the time of drafting) scenario.  So when an agency crafting guidance for a regulated industry has advisors on hand who have first-hand knowledge and expertise about particular real-world occurrences, such as data security breaches, it would seem that agency would be in an ideal position to create relevant, clear, and sufficiently detailed guidance that the affected industry could use to prevent certain occurrences and achieve compliance with the agency’s requirements.

As described in prior posts on this blog, the Federal Trade Commission (FTC) has brought numerous enforcement actions against businesses based on its decision that the businesses’ data security practices were “deceptive” or “unfair” under Section 5 of the FTC Act.  When I last checked the FTC’s website, there were 54 cases listed under the “Privacy and Security” topic and “Data Security” subtopic, one of which is the LabMD case filed on August 29, 2013.  Blog readers may have “discerned” (as do smart businesses when reviewing these cases and trying to figure out what the FTC’s data security “standards” might be) that I am intrigued with the LabMD case.  My intrigue arises, in part, from the stark contrast between the FTC and the Department of Health and Human Services (HHS) and the way these agencies identify data security standards applicable to regulated entities.  Of course, HHS’s standards apply specifically to the subset of data that is protected health information (PHI) – precisely the type of data involved in the LabMD case – but that hasn’t stopped the FTC from insisting that its own “standards” also apply to covered entities and business associates regulated by HIPAA.

The latest development in the LabMD case is particularly intriguing.  On May 1, 2014, FTC Chief Administrative Law Judge D. Michael Chappell granted LabMD’s motion to compel deposition testimony as to “what data security standards, if any, have been published by the FTC or the Bureau [of Consumer Protection], upon which … [FTC] Counsel intends to rely at trial to demonstrate that … [LabMD’s] data security practices were not reasonable and appropriate.”  The FTC had fought to prevent this testimony, arguing that the “FTC’s “data security standards” are not relevant to” the factual question of whether LabMD’s data security procedures were “unreasonable” in light of the FTC’s standards.

The FTC does publish a “Guide for Business” on “Protecting Personal Information” on its website.  This “Guide” is very basic (15 pages in total, with lots of pictures), and includes bullet points with tips such as “Don’t store sensitive consumer data on any computer with an Internet connection unless it’s essential for conducting your business.”  The “Guide” does not reference HIPAA, and does not come close to the breadth and depth of the HIPAA regulations (and other HHS published materials) in terms of setting forth the agency’s data security standards.

LabMD’s Answer and Defenses to the FTC’s Complaint was filed on September 17, 2013.  In that document, LabMD admits to having been contacted in May of 2008 by a third party, Tiversa, claiming that it had obtained an “insurance aging report” containing information about approximately 9,300 patients.  Tiversa, a privately-held company that provides “intelligence services to corporations, government agencies and individuals based on patented technologies” and can “locate exposed files … and assist in remediation and risk mitigation,” boasts an impressive advisory board.  According to Tiversa’s website, advisory board member Dr. Larry Ponemon “has extensive knowledge of regulatory frameworks for managing privacy and data security including … health care,” and “was appointed to the Advisory Committee for Online Access & Security” for the FTC.

Perhaps the FTC might consult with Dr. Ponemon in crafting data security standards applicable to the health care industry, since Tiversa apparently identified LabMD’s data security breach in the first place.  If (as published by the Ponemon Institute in its “Fourth Annual Benchmark Study on Patient Privacy and Data Security”) criminal attacks on health care systems have risen 100% since the Ponemon Institute’s first study conducted in 2010, the health care industry remains vulnerable despite efforts to comply with HIPAA and/or discern the FTC’s data privacy standards.  Bringing Dr. Ponemon’s real-world experience to bear in crafting clear and useful FTC data privacy standards (that hopefully complement, not contradict, already-applicable HIPAA standards) might actually help protect PHI from both criminal attack and discovery by “intelligence service” companies like Tiversa.